India's Sun Pharmaceutical Industries Ltd., continuing with its aggressive deal-making strategy, is in talks to acquire Swedish drug maker Meda AB, people familiar with the matter said, a potential deal that could be worth roughly $5 billion.

Mumbai-based Sun, India's largest drug maker, has been canvassing banks to help line up funding for such a deal, people familiar with the matter said. Sun is currently seeking letters of credit from banks and will present those to Meda's board to convince it of Sun's ability to close...